nep-pol New Economics Papers
on Positive Political Economics
Issue of 2018‒04‒09
seventeen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Why an EU Referendum? Why in 2016? By Becker, Sascha O; Thiemo Fetzer
  2. Terrorism, Colonialism and Voter Psychology: Evidence from the United Kingdom By Jamal Bouoiyour; Refk Selmi
  3. Dismantling the "Jungle": Migrant Relocation and Extreme Voting in France By Paul Vertier; Max Viskanic
  4. How public perception towards party (dis)unity a ects the introduction of primaries By Moskalenko, Anna
  5. Political competition and economic performance: Empirical evidence from Pakistan By Chaudhry, Ahmed; Mazhar, Ummad
  6. Democracy and government spending By Balamatsias, Pavlos
  7. Machine Learning Indices, Political Institutions, and Economic Development By Klaus Gründler; Tommy Krieger
  8. Does Decentralization of Decisions Increase the Stability of Large Groups? By Bjedov, Tjaša; Lapointe, Simon; Madies, Thierry; Villeval, Marie Claire
  9. Tying the Politicians' Hands: The Optimal Limits to Representative Democracy By Didier Laussel
  10. De Facto Power, Democracy, and Taxation: Evidence from Military Occupation during Reconstruction By Mario Chacon; Jeffrey Jensen
  11. The Non-Monotonic Political Effects of Resource Booms By Stanislao Maldonado
  12. Negative Returns: U.S. Military Policy and Anti-American Terrorism By Eugen Dimant; Tim Krieger; Daniel Meierrieks
  13. Presidents and the US Economy from 1949 to 2016 By Timothy Kane
  14. Effects of Municipal Mergers on Voter Turnout By Lapointe, Simon; Saarimaa, Tuukka; Tukiainen, Janne
  15. Intergenerational Mobility and Preferences for Redistribution By Stefanie Stantcheva; Edoardo Teso; Alberto Alesina
  16. HRMI Civil and Political Rights Metrics: 2018 Technical Note By K Chad Clay; Ryan Bakker; Anne-Marie Brook; Daniel W Hill; Amanda Murdie
  17. A Dialogue between a Populist and an Economist By Boeri, Tito; Mishra, Prachi; Papageorgiou, Chris; Spilimbergo, Antonio

  1. By: Becker, Sascha O (University of Warwick); Thiemo Fetzer (University of Warwick)
    Abstract: The outcome of the UK’s Brexit Referendum has been blamed on political factors, such as concerns about sovereignty, and economic factors such as migration, and trade integration. Analyses of the cross-sectional referendum voting pattern cannot explain how anti-EU sentiment built up over time. Since UKIP votes in the 2014 EU Parliament elections are the single most important predictor of the Vote Leave share, understanding the rise of UKIP might help to explain the role of political and economic factors in the build-up of Brexit. This paper presents new stylized facts suggesting that UKIP votes in local, national and European elections picked up dramatically in areas with weak socio-economic fundamentals, but only after 2010, at the expense of the Conservatives, and partly also Labour. The timing suggests that the Government’s austerity measures might have been a crucial trigger that helped to convert economic grievances into UKIP votes, putting increasing pressure on the Conservatives to hold the EU Referendum.
    Keywords: Political Economy ; Austerity ; Globalization ; Voting ; EU
    JEL: R23 D72 N44 Z13
    Date: 2018
  2. By: Jamal Bouoiyour (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour); Refk Selmi (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)
    Abstract: Extant theory suggests that terrorist groups strategically plan their attacks around elections. This study investigates the impact of terrorism on voting behavior in the United Kingdom (UK). To address endogeneity concerns related to the possibility that terrorism may be a response to the elections results, we have conducted an instrumental variables approach that relies on the political participation of Commonwealth-origin migrant voters, taking into account the fact that the strength of the Commonwealth's commitment to its principles and values-including the promotion of human and political rights, tolerance, respect for diversity, coexistence, equity and fairness-may affect terror dynamics. In other words, we have connected terrorism to colonial policies and practices. In fact, the colonial rulers had established effective application of economic, social and cultural rights, as well as civil and political rights which would contribute to the success of counter-terrorism strategies. The results indicate that terrorism significantly affects the electorate's preferences. We have also found that the vote of the right-wing party is likely to be higher in localities near the home base of a terror incident and in localities adjacent to international borders, and lower in cities with a noticeable percentage of Muslims. The current UK economic conditions do not work to the advantage of the right-wing party. The results are statistically significant and robust across a multitude of model specifications and differing measures of terrorism.
    Keywords: Terrorism,Colonialism,Voter behavior,Elections, United Kingdom
    Date: 2018–01–18
  3. By: Paul Vertier; Max Viskanic
    Abstract: Can a small scale inflow of migrants affect electoral outcomes? We study whether the relocation of migrants from the Calais “Jungle” to temporary migrant-centers (CAOs) in France affected the results of the 2017 presidential election. Using an instrumental variables approach that relies on the size of holiday villages present in municipalities, we find that the presence of a CAO reduced the vote share increase of the far-right party (Front National) by about 15.7 percent. These effects, which dissipate spatially and depend on city characteristics and on the size of the inflow, point towards the contact hypothesis (Allport (1954)).
    Keywords: political economy, voting, migration, EU, France, migrants
    JEL: C36 D72 J15 P16 R23
    Date: 2018
  4. By: Moskalenko, Anna
    Abstract: Abstract Political parties are increasingly adopting more inclusive candidate selection methods by introducing primary elections. This paper identi es motives of this change, as well as decision makers leading to this introduction. We view a party as a coalition of factions, composed by a party elite and a dissenting faction. By developing a game- theoretical model of interplay between the party elite and the dissenting faction, we fi nd that the primaries are introduced in two scenarios: (1) when the party elite fi nd itself in a weak position under the credible threat of the dissidents to leave the party and (2) when there is a high cohesion between both factions and the party elite itself takes the initiative in introducing primaries. Keywords: Political parties, Primaries, Party split, Party factions, Candidate selection, intra-party politics. JEL Classi fication Number: D71, D72
    Keywords: Partits polítics, Eleccions primàries, 32 - Política,
    Date: 2017
  5. By: Chaudhry, Ahmed; Mazhar, Ummad
    Abstract: The influence of politics on economic policy is not fully understood. The challenge to ensure political inclusiveness and economic prosperity remains. Perhaps, one way to attain this objective is by increasing political competition. This paper gathers empirical evidence from Pakistan, a country with a checkered political history characterized by episodes of representative, non-representative, and indirectly elected governments. In recent years, the country has witnessed a gradual strengthening of democratic rule with economic progress. Focusing on nine elections held over 1970 to 2015 the authors measure political competition and estimate its impact on economic performance. Contrary to popular conceptions about Pakistan's economic performance, they find a positive association between lack of political competition and poor economic performance. This finding holds at national as well as subnational levels in Pakistan and withstands a number of robustness tests.
    Keywords: Political Competition,Pakistan,Economic Performance,Subnational
    JEL: H50 H83 D70
    Date: 2018
  6. By: Balamatsias, Pavlos
    Abstract: In this paper, we argue that democracies positively affect government expenditure. We hypothesize that democracies produce more public goods for their citizens because they are better at using tax revenues, while autocracies misappropriate taxes. We empirically test the validity of this argument using data on 61 countries from 1993 to 2012. The explanatory variable used is a dichotomous measure of democracy, but we alter our analysis from earlier research by assuming that democracy is not an exogenous variable based on the theory of Huntington (1991) and the methodology of Acemoglu, Naidu, Restpero and Robinson (2014) and Balamatsias (2017a) about regional democratization waves. According to this theory, democratization occurs in regional waves; consequently, diffusion of demand for or discontent with a political system is easier to happen in countries in the same area due to socio-political and historical similarities. This measure shows us that demand for or discontent with a political system in a geographical area influences the power of a country’s political regime and its effect on government policies. Our results using a number of estimations and robustness tests show us that regional democratization waves positively correlate with democracy. Furthermore, our main 2SLS regression as well as our OLS, fixed effects and GMM estimations show us that democracy increases production of public goods and services and education spending. When controlling for a smaller dataset, without African and Middle-eastern countries our first-stage results remain the same and the positive effect of democracy on government spending is now quantitatively bigger suggesting wealthier democracies produce more public goods and services when compared to poorer ones. This hypothesis is further substantiated when we use a sample consisting of non-OECD countries and find that democracy has no effect on government spending. Our results show that democracies where large segments of the population belong in the middle-income class, vote in favour of these policies because they can utilize government spending to increase production and output, lower inequality and attract foreign capital, unlike poorer democracies.
    Keywords: Democracy, Political development, Regional democratization waves, Fiscal policy, Government expenditures
    JEL: E62 H5 P16
    Date: 2018–03–06
  7. By: Klaus Gründler; Tommy Krieger
    Abstract: We present a new aggregation method - called SVM algorithm - and use this technique to produce novel measures of democracy (186 countries, 1960-2014). The method takes its name from a machine learning technique for pattern recognition and has three notable features: it makes functional assumptions unnecessary, it accounts for measurement uncertainty, and it creates continuous and dichotomous indices. We use the SVM indices to investigate the effect of democratic institutions on economic development, and find that democracies grow faster than autocracies. Furthermore, we illustrate how the estimation results are affected by conceptual and methodological changes in the measure of democracy. In particular, we show that instrumental variables cannot compensate for measurement errors produced by conventional aggregation methods, and explain why this failure leads to an overestimation of regression coefficients.
    Keywords: democracy, development, economic growth, estimation bias, indices, institutions, machine learning, support vector machines
    JEL: C26 C43 N40 O10 P16 P48
    Date: 2018
  8. By: Bjedov, Tjaša (Distance Learning University of Switzerland); Lapointe, Simon (VATT, Helsinki); Madies, Thierry (University of Fribourg); Villeval, Marie Claire (CNRS, GATE)
    Abstract: Using a laboratory experiment with nested local and global public goods, we analyze the stability of global groups when individuals have the option to separate, according to the degree of decentralization of decision-making. We show that increasing the number of decisions made at the local level within a smaller group reduces the likelihood that individuals vote in favor of a break-up of the global group. Voting for a break-up of the global group is more likely when global group members are less cooperative and local group members are more cooperative. Reinforcing local group identity has no impact on votes.
    Keywords: break-up of groups, decision rights, voting behavior, public goods, experiment
    JEL: C91 D72 H77
    Date: 2018–02
  9. By: Didier Laussel (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales)
    Abstract: We study the optimal delegation problem which arises between the median voter (writer of the constitution) and the (future) incumbent politician when not only the state of the world and but also the politician’s type (preferred policy) are the policy-maker’s private information. We show that it is optimal to tie the hands of the politician by imposing him/her both a policy floor and a policy cap and delegating him/her the policy choice only in between. The delegation interval is shown to be the smaller the greater is the uncertainty about the politician’s type. These results apply outside the specific problem to which our model is applied here.
    Keywords: representative democracy,optimal delegation,political uncertainty
    Date: 2018–01
  10. By: Mario Chacon; Jeffrey Jensen (Division of Social Science)
    Abstract: The extension of the franchise to former slaves in the post-Civil War American South provides a unique case to study the fiscal consequences of democratization. Black suffrage was not determined internally but was a consequence of military defeat and externally enforced by the U.S. Army during Reconstruction. We employ a triple-difference model to estimate the joint impact of enfranchisement and federal enforcement on taxation. We find that occupied counties where black voters comprised larger shares of the electorate levied higher taxes compared to similar non-occupied counties. These counties then experienced a comparatively greater decline in scal revenues in the decades following the end of Reconstruction. We also demonstrate that in these occupied counties, black politicians were more likely to be elected, and political murders by white supremacist groups were less likely. These fi ndings provide evidence on the key role of federal troops in limiting political capture by Southern elites.
    Date: 2018–01
  11. By: Stanislao Maldonado (Universidad del Rosario)
    Abstract: This study uses variation in natural resource rents and mineral production among Peruvian municipalities to analyze the impact of resource booms on local politicians' behavior and citizens' well-being. Although this topic has recently attracted scholarly interest, existing empirical evidence remains inconclusive regarding whether resource booms are beneficial or detrimental to citizens via their effects on public good provision and living standards. Despite many existing theoretical models allowing for the possibility of non-monotonic responses, empirical literature has largely approached this phenomena using linear models, thus misunderstanding the complex nature of resource booms. By examining recent extraordinary mineral price increases along with particular rules for natural resource rent distribution in Peru, I show that the effects of resource booms on reelection outcomes, political competition, public goods provision, clientelism, and well-being are conditional to the size of the rents in a non-monotonic fashion. These results are robust to endogenous production responses and are consistent with recent theoretical scholarship for resource rich economies.
    Keywords: Resource booms, political competition, reelection, intergovernmental transfers
    JEL: D72 D78 Q33
    Date: 2018–04
  12. By: Eugen Dimant; Tim Krieger; Daniel Meierrieks
    Abstract: We investigate the effect of U.S. military aid and U.S. troop deployments on anti-American terrorism, using a sample of 106 countries between 1986 and 2011. We find that greater military commitment leads to more anti-American terrorism. We study the underlying mechanisms using a mediation analysis and show that both U.S. military aid and troop deployments in foreign countries do not improve local state capacity. Rather, we find that more military aid (but not troop deployments) is linked to poorer political-institutional outcomes in aid-receiving countries, explaining the positive association between U.S. military aid and anti-American terrorism. Our findings suggest that U.S. military policy does not make the United States safer from transnational terrorism.
    Keywords: U.S. military aid, U.S. troop deployments, anti-American terrorism, transnational terrorism, mediation analysis
    JEL: D74 F35 F50
    Date: 2017–06
  13. By: Timothy Kane
    Abstract: Does the US economy perform better when the president of the United States is a Democrat or a Republican? This paper explores the economic growth rate during different presidencies using data from 1949 to 2016, and confirms the Democratic-Republican gap while also showing the gap depends entirely on an unrealistic lag structure. The gap disappears and loses significance when lags of four, three, or even two quarters are considered, which is what history and political science recommend is appropriate given the lag between political actions and economic consequences. A superior method of overlapping presidential responsibility for transition periods is presented.
    Keywords: U.S. Presidency, Economic Growth, Political Party
    JEL: D72 E23 E32 E65 N12 N42
    Date: 2017–01
  14. By: Lapointe, Simon; Saarimaa, Tuukka; Tukiainen, Janne
    Abstract: We study the effects of municipal mergers on voter turnout in a difference-in-differences framework, using data from a wave of municipal mergers in Finland in 2009. Analysing two pre-merger elections and three post-merger elections, spanning a total of 17 years, we find that municipal mergers decrease voter turnout by 4 percentage points in the long run in the relatively small municipalities compared to similar small municipalities that did not merge. As the average turnout rate prior to merging in this group was around 69%, this is a substantial effect. We also find that virtually nothing happens to turnout in the municipalities that were relatively large within their merger. Furthermore, mergers are associated with a decrease in voters’ political efficacy and turnout decreases more in those municipalities that experience larger decreases in efficacy.
    Keywords: Difference-in-differences, jurisdiction size, municipal mergers, voter turnout, C23, D72, H70,
    Date: 2018
  15. By: Stefanie Stantcheva (Harvard University); Edoardo Teso (Harvard University); Alberto Alesina (Harvard University)
    Abstract: Using newly collected cross-country survey and experimental data, we investigate how beliefs about intergenerational mobility affect preferences for redistribution in five countries: France, Italy, Sweden, U.K., and U.S.. Americans are more optimistic than Europeans about intergenerational mobility, and too optimistic relative to actual mobility. Our randomized treatment that shows respondents pessimistic information about mobility increases support for redistribution, mostly for equality of opportunity policies. A strong political polarization exists: Left-wing respondents are more pessimistic about intergenerational mobility, their preferences for redistribution are correlated with their mobility perceptions, and they respond to pessimistic information by increasing support for redistribution. None of these apply to right-wing respondents, possibly because of their extremely negative views of government.
    Date: 2017
  16. By: K Chad Clay (University of Georgia); Ryan Bakker (University of Georgia); Anne-Marie Brook (Motu Economic and Public Policy Research); Daniel W Hill (University of Georgia); Amanda Murdie (University of Georgia)
    Abstract: This paper details a new methodology developed to measure civil and political rights violations in a pilot sample of 13 diverse countries. In doing so, we discuss the problems present in previous attempts to measure civil and political rights cross-nationally and argue that our approach overcomes many of those problems. Using an expert survey that draws on the knowledge of human rights researchers, advocates, lawyers, journalists, and others responsible for directly monitoring the human rights situation in countries worldwide, we present new measures of the intensity and distribution of respect for seven separate areas of civil and political rights and compare those data with existing work. The results demonstrate that our technique for producing data on civil and political rights produces outcomes with strong face validity vis-à-vis existing measures, while providing more and better information than any previous cross-national data collection effort. We aim to extend this approach to most other countries in the world over the coming years.
    Keywords: Human rights, measurement, international comparisons, data visualisation
    JEL: J10 K33 K40 N30 N40
    Date: 2018–03
  17. By: Boeri, Tito; Mishra, Prachi; Papageorgiou, Chris; Spilimbergo, Antonio
    Abstract: In this imaginary dialogue, a populist and an economist discuss the role of economic shocks to explain populism. A simple correlation between economic shocks and populism is weak. However, economic shocks can explain well the phenomenon of populism in countries with low pre-existent level of trust. This is confirmed both at the macro cross-country level and also by micro evidence obtained from surveys. Finally, this finding is consistent with the "ideational approach" in political science, which emphasizes how the populist narrative opposes the "corrupt elite" to the "virtuous people."
    Keywords: Europe; Political parties; populism
    JEL: A10 A12
    Date: 2018–02

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